My Two Cents at the ABA Midyear Meeting

I had the opportunity to testify before the ABA Futures Commission on February 2, 2015 during the ABA Midyear Meeting. I had already submitted written comments in December 2014, which focused on current and future changes in legal services – the business and profession. At the hearing I took the opportunity to suggest that the Commission not only think about the future of legal services, but also what the future might/should look like for the regulation of legal services in light of whatever findings or recommendations might come from the Commission.

At last count, about 17% of the Commission is composed of fellow Washingtonians. This overrepresentation may be due to the fact that the Washington Supreme Court and some within the WSBA leadership are among the most active and determined law practice regulatory disruptors in the US.

The following is not a verbatim account of my comments, but is my recollection plus some additional thoughts, which I could not say in the five minutes the Commission allotted for my testimony:

I am personally convinced that the regulation of legal services in the US will be substantially liberalized and, in fact, that process has already begun in a de facto manner. I suggested that it was necessary for the Commission to consider the implications for the current regulatory scheme if they too conclude that some of the changes they are considering should or will come to pass.

1. Changes to the Lawyer Monopoly

Initially, under the historic government sanctioned monopoly, the stakeholder group for legal services was small and consisted primarily of the public, lawyers, and courts. Historically, courts and bar associations worked cooperatively, for the most part, in the self-regulation of law practice. Lawyers’ interests were protected by virtue of the monopoly and the public’s interests were protected by ethics rules. Lawyer behavior was regulated through those ethics rules and, I truly believe, a sincere sense of duty to the legal system and society, including a commitment to pro bono. [1] It has, thus far, been a social contract. However, many believe the legal profession has breached this contract and change is needed – principally, calling for the end of the lawyer monopoly.

The monopoly has already begun to crumble. Contracts require more than one party. The social contract is not and will not work for lawyers if the monopoly continues to crumble, which it will as we move from de facto to formal liberalization and regulatory reform. Moreover, the stakeholder group will become larger and could include regulators, tech start-ups, new types of legal services providers, MDPs, non-profit legal service providers, public accounting firms, and corporations, like Walmart, IBM, etc.

2. The Need for a New Regulatory Framework

Progressive regulators are urging lawyers to quickly embrace change that is not in their best interests and they express dismissive frustration when lawyers are slow to
embrace that change. Yet, those same regulators seem equally convinced that there is no need to overhaul the traditional regulatory framework. In essence, they argue the bar should continue to regulate legal services and also be the representative body of all legal services stakeholders. Their favorite line appears to be that these two things – regulating and representing disparate interests – “are not mutually exclusive.” I believe they are in fact mutually exclusive.

This is not to say that all stakeholders will diverge on all matters, but they most certainly will on some. Thus, I would argue that the only rational way forward on the regulatory front is to cease the traditional way legal services are regulated. This should begin now, not after the paradigm has shifted. Regulators should be regulators. Lawyers should have an independent professional association that represents the interests of lawyers, which is separate from the regulatory body. That professional association should come together with other stakeholders, including regulators, to work collaboratively on matters of common interest, of which there will be many. When interests diverge, the professional association representing lawyers should solely represent the interests of its members. This is not a revolutionary idea – it is how this country operates in an open, competitive marketplace.

a. Advocating for Lawyers v. Regulating the Legal Industry

With respect to who could step up to represent the interests of lawyers as a professional association, the ABA may be a good choice. It presently exists and already does so to some degree, but not to the degree that will be required in a changed legal marketplace. It would be expedient to leverage the ABA’s extant status, as it could take years before a new association could independently spring into action.

In addition to the fact that current state bar associations cannot, as a practical matter, represent the interests of disparate stakeholders; it is not feasible for state bar associations and courts to regulate a multi-player, multifaceted legal services marketplace given current capabilities, resources, and budgets. Lawyers will certainly not agree to pay for these increased costs through higher dues [2] and the contribution of other stakeholders would likely be initially too small. The regulatory framework would also need to be in place before the regulated activities could begin

If legal services become more of an industry than a profession, the stakeholder group will grow to include all sorts of non-lawyer business entities. The complexity and costs of regulating this new industry landscape would be such that only a taxpayer funded agency could manage the regulation. Should courts really be the regulator of legal services or should courts surrender rule making and regulatory authority to legislatures and state agencies? Should state courts take their new place in the paradigm and stick to their principal role as impartial adjudicators of law suits, including those that might arise due to regulatory disputes?

When a paradigm shifts, all things associated shift with it.

[1] A commitment to pro bono doesn’t and shouldn’t mean that lawyers should be expected to shoulder the entire weight of society’s underserved at the expense of their own livelihoods. Lawyers and firms collectively contribute enormous resources annually to non-profit legal services and direct pro bono service. Additionally, a lot of pro bono services don’t start out that way, but end up pro bono when clients can’t pay their bills and lawyers write off the balances.

[2] In 2012 the members of the WSBA voted to reduce their annual membership dues.